MC Labour Services Pty Ltd v Biyas Co Pty Ltd and Oktay Secen

[2011] VCC 978

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST

GENERAL DIVISION

Case No. CI-10-01101

MC LABOUR SERVICES PTY LTD	Plaintiff
(ABN 14 078 417 133)
v
BIYAS CO PTY LTD	First Defendant
(ACN 082 204 368)
and
OKTAY SECEN	Second Defendant

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JUDGE:	HIS HONOUR JUDGE SHELTON
WHERE HELD:	Melbourne
DATE OF HEARING:	13 May 2011
DATE OF JUDGMENT:	27 May 2011
CASE MAY BE CITED AS:	MC Labour Services Pty Ltd v Biyas Co Pty Ltd & Oktay Secen
MEDIUM NEUTRAL CITATION:	[2011] VCC 978

REASONS FOR JUDGMENT

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Catchwords: Debt claim – effect of failure to give notice of assignment of debt under s.134 of Property Law Act 1958; s.51A, 52 and 75B of Commonwealth Trade Practices Act 1974; s.4 and 9 Victorian Fair Trading Act 1999 – Jones v Dunkel (1959) 101 CLR 298; O’Donnell v Reichard [1975] VR 916 at 929; Futuretronics International Pty Ltd v Gadzhis (1992) 2 VR 217.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P F Agardy	Pryles & Co.
For the Defendants	Mr J Snow	Malkoun & Co.
HIS HONOUR:

1          In this proceeding, the plaintiff claims the sum of $104,346.19 from the defendants. The second defendant is the sole director and secretary of the first defendant.

2          The plaintiff is a labour hire company which provides labourers to the commercial construction industry. In November 2009, the first defendant was a cabinet maker sub-contractor to a company in the Grocon Group (“Grocon”) on a project at the Watsonia Army Barracks. It required additional labour on site and arranged for the plaintiff to provide these labourers. The first defendant completed and signed the plaintiff’s pro forma Application for Commercial Trading Account (“the Credit Application”) which was dated 14 November 2009. This stated that the trading name of the first defendant was Modern Cabinets which, it appears, was an unregistered business name.

3          The plaintiff provided two labourers, known as Terry and Simon, to the first defendant. The plaintiff rendered weekly invoices to the first defendant, normally two invoices, one for each of Terry and Simon.

4          Of the sum of $104,346.19, the first defendant concedes that the sum of $72,043.97 is owing. It disputes that the balance of $32,302.22 is owing. This sum is the total amount invoiced by the plaintiff to the first defendant for the month of February 2010. The sole issue in this proceeding is the liability of the first defendant and/or the second defendant for payment of this sum.

5          The second defendant gave evidence that, on or about 31 January 2010, he spoke on the telephone to Mark O’Grady (“O’Grady”), the operations manager of the plaintiff, stating that the first defendant did not require Terry and Simon to work for it any longer since it could not afford to pay them on account of financial difficulties it was encountering due to slow payment by Grocon. He stated that O’Grady accepted this and said that he would allocate Terry and Simon to other jobs. The second defendant also stated that, on the same day, he heard his secretary, Louise McLaughlin, advising an employee of the plaintiff on the telephone that the first defendant could no longer afford to pay for Terry and Simon. However, for both Terry and Simon, timesheets were submitted on a pro forma document “MC Services Group (Aust)” indicating that they were both working on site at Watsonia throughout February. These timesheets were signed by Mehmet Karmac (“Karmac”), the first defendant’s supervisor on site at Watsonia, and who had also been a director of the first defendant between 13 September 2001 and 18 January 2002, below the words:

“I confirm that this employee has worked the hours as above, please

invoice client and pay employee for these hours.”

The second defendant did not complain to the plaintiff when the weekly invoices for February 2010, seven in total, were received.

6          The second defendant stated that Karmac may have signed the timesheets so that there would be a record of who was working on site to satisfy occupational health and safety requirements that the number of man hours spent on site was properly recorded. I find this explanation of Karmac’s actions fanciful and unconvincing. He was of the view that Grocon probably required Terry and Simon on the site and that it should pay them.

7          O’Grady gave evidence that he did not receive a telephone call from the second defendant at the end of January 2010 indicating that the services of Terry and Simon were no longer required at Watsonia.

8          Further, neither Karmac nor McLaughlin were called to give evidence and no explanation was given for their unavailability to give evidence.

9          In the circumstances, it is appropriate to apply what has become known as the rule in Jones v Dunkel (1959) 101 CLR 298, which is stated in O’Donnell v Reichard [1975] VR 916 at 929, per Newton and Norris JJ, as follows:

“It is sufficient to say that in our opinion for the purposes of the present case the law may be stated to be that where a party without explanation fails to call as a witness a person whom he might reasonably be expected to call, if that person's evidence would be favourable to him, then, although the jury may not treat as evidence what they may as a matter of speculation think that that person would have said if he had been called as a witness, nevertheless it is open to the jury to infer that that person's evidence would not have helped that party's case; if the jury draw that inference, then they may properly take it into account against the party in question for two purposes, namely: (a) in deciding whether to accept any particular evidence, which has in fact been given, either for or against that party, and which relates to a matter with respect to which the person not called as a witness could have spoken; and (b) in deciding whether to draw inferences of fact, which are open to them upon evidence which has been given, again in relation to matters with respect to which the person not called as a witness could have spoken.”

I infer that any evidence Karmac and McLaughlin might have given would not have assisted the first defendant’s case.

10        As I indicated towards the end of the trial, I have no difficulty in concluding that the sum in dispute of $32,302.22 is owed by the first defendant and that therefore the sum of $104,346.19 is owed by the first defendant in respect of the services provided by the plaintiff.

11        A potential complication is that in early December 2009, the plaintiff assigned its accounts receivable to Oxford Funding Pty Ltd (“Oxford”) pursuant to a factoring agreement (“the factoring agreement”).

12        Oxford gave notice to the second defendant of this on 21 December 2009. This notice stated:

“We therefore give notice that the current and all future debts of MC Labour Services Pty Ltd have been assigned and transferred to Oxford, who will manage the Ledger and do the collection of the invoices for MC Labour Services Pty Ltd.

…

Payments must be paid to Oxford in order to obtain a valid discharge of your debt.

…

This instrument remains in full effect until you are notified by Oxford in writing that the arrangement has ceased.”

13 It was common ground that this notice complied with s.134 of the Property Law Act 1958 (“the PLA”).

14 On 9 November 2010, Oxford reassigned the debts of the first defendant to the plaintiff pursuant to a provision in the factoring agreement, since these debts remained unpaid after ninety days. However, no notice under s.134 of the PLA was given to the first defendant.

15        At the commencement of the trial on 11 May last, the defendants sought leave to amend their Defence, alleging that the plaintiff had no standing to bring their present proceeding which commenced on 17 March 2010. The plaintiff did not object to the defendants being given leave to amend their Defence although it was only notified of the proposed amendment on the preceding day despite the matter having previously been listed for trial in November 2010 and February 2011.

16 In the course of the trial, the plaintiff gave a Notice of Reassignment by Oxford to the plaintiff on 9 November 2010 of the debts of MC Labour Services Pty Ltd. On its face it appears to comply with s.134 of the PLA and it was not suggested otherwise by Mr Snow, who appeared on behalf of the defendants.

17 Mr Agardy, who appeared on behalf of the plaintiff, submitted that the Notice of Reassignment was a valid reassignment under s.134 of the PLA. He relied upon a statement in Halsbury’s Laws of Australia at paragraph 315-450:

“The notice may be given at any time and may be given either by the

assignor or by the assignee.”

18        Mr Snow submitted that the Notice of Reassignment could not have a retrospective effect.

19        In the end, there is no doubt that the plaintiff has an entitlement pursuant to the reassignment to the sum of $104,346.19 and the second defendant has not been prejudiced by making a payment to the wrong payee, since it has made no payment. Whether or not the Notice of Reassignment has a retrospective effect is an academic question, and it would be pointless to require the plaintiff to re-plead its case, and possibly join Oxford as a party to the proceedings. The further cost involved in doing so cannot be justified.

20 As I mentioned during the hearing, s.7(1) of the Civil Procedure Act 2010 would also appear relevant. Here, since I have found that the sum of $104,346.19 is payable by the first defendant, the only remaining issue is to whom it is to be paid. As appears, the plaintiff has the ultimate entitlement to this sum.

21        There will therefore be judgment for the plaintiff against the first defendant in the sum of $104,346.19.

22        The credit application provided:

“Overdue accounts will incur a 2.5 per cent per month admin fee on

balance in excess of agreed terms.”

23        The defendants pleaded that this was a penalty and unenforceable. Mr Agardy indicated that the plaintiff would not pursue its claim for interest at 2.5 per cent per month but would be content with interest at the statutory rate, which I am prepared to allow.

24        The plaintiff also seeks to recover against both defendants, and particularly the second defendant, pursuant to the Commonwealth Trade Practices Act 1974 (“the TPA”) and the Victorian Fair Trading Act 1999 (“the FTA”).

25        Mr Agardy submitted that the TPA applies to the second defendant by virtue of s.75B(1)(a) and (c) of the TPA.

26        The plaintiff relies upon promises to pay made by the second defendant as a basis for claims against both defendants under the TPA and the FTA.

27 The statutory provisions relied upon by the plaintiff are s.52 of the TPA and its counterpart, s.9 of the FTA. So far as promises to pay amount to representations as to future matters, the plaintiff relies upon s.51A of the TPA and the corresponding s.4 of the FTA. Both s.51A(2) of the TPA and s.4(2) of the FTA cast a burden upon the defendants to show that the second defendant had reasonable grounds for making representations as to payment. The plaintiff then seeks damages under s.82 and 87 of the TPA and s.159 of the FTA.

28        In Futuretronics International Pty Ltd v Gadzhis (1992) 2 VR 217, at 238, Ormiston J stated:

“It is wrong to view every contractual obligation as an unqualified promise to perform the stipulated act. Indeed it is rare that a contractual promise is not in some way qualified by some reciprocal obligation to be performed by the promisee or by some other circumstance. If the promise induced the other party to enter into the agreement, as one can readily accept it would, then it is that promise and the circumstances then surrounding it which must be examined. The promise can only be said to be misleading or deceptive if it was in some way inaccurate; otherwise every unfulfilled mutual contractual promise will constitute misleading or deceptive conduct, a consequence which I cannot believe those who drafted the Act intended. If intention be relevant, the promise may be misleading if the promisor had no intention to fulfil it at the time it was made and accepted. If intention be irrelevant, then the promise may be misleading if the promisor had no ability to perform it at that time. ... .”

and at 239:

“…It would seem on the authorities that, at the least, a contractual promise would amount to an implied representation that the promisor then had an intention to carry out that promise. If it can be shown that he had no such intention he would be guilty of misleading or deceptive conduct. Likewise it would seem that such a representation connotes a present ability to fulfil that promise which, if shown to be untrue at the time of making, would likewise characterise the implied representation as misleading or deceptive.”

and at 240:

“… the promisee is not … bound to show that the promisor had no intention or no ability to perform the promise at the time of its making. The promisor will be deemed not to have reasonable grounds for making the representation or promise, unless he satisfies the court by evidence to the contrary that he had reasonable grounds for making that representation. … .”

29        The plaintiff relies upon representations made by the second defendant to the plaintiff in November 2009 that the first defendant was willing and able to pay the plaintiff’s accounts and that its accounts would be paid. These representations are particularised as follows:

“(a)	The representations were in writing and oral.
(b)	In so far as they were in writing they consisted of the signing by the Second Defendant of the application referred to in paragraph 4 hereof.
(c)	In so far as they were oral they were made by the Second Defendant by telephone to Mark O’Grady on behalf of the Plaintiff on or about 4 November 2009. In the course of that conversation Mr O’Grady told the Second Defendant that unless a payment was made [to] the Plaintiff that day the plaintiff would cease to provide services to the First Defendant and would withdraw labourers it had hired to the First Defendant to work on the site referred to in paragraph 4 hereof. The Second Defendant told Mr O’Grady that payment would be mad and requested that the labourers be kept on that site.”

30        The “application referred to in paragraph 4“ is the Credit Application which provided:

“PAYMENT: As we are obligated to pay for all labour hire personnel

weekly our terms of 14 days net are critical in our ongoing service.”

31        The second defendant gave evidence that after the first defendant had hired Terry and Simon from the plaintiff, it encountered financial difficulties on account of the failure by Grocon to pay its progress claims in full when due. He stated that Grocon only paid a portion of monies due to it on progress claims. There was no evidence before me that the first defendant was in financial difficulties and not able to pay the plaintiff’s invoices within fourteen days in November 2009. Further, the first defendant had previously hired labourers from the plaintiff. Presumably it had then paid the plaintiff’s invoices in a timely fashion. Otherwise, the plaintiff would not have dealt with it in respect of the Watsonia project.

32        I have difficulty in seeing how the plaintiff can rely upon the conversation of 4 November 2009. At 4 November 2009, the plaintiff’s records show that the sum of $21,602.35 was owed by the first defendant to the plaintiff. Clearly this sum was owed in respect of a project other than Watsonia, since the agreement for Watsonia was only made on 14 November 2009. The sum of $21,602.35 was paid by a payment of $10,000 on 6 November 2009 and by a payment of $11,618.76 on 20 November 2009. Mr Agardy conceded that this was “a powerful point”.

33        I accept the submission of Mr Snow that in November 2009 the second defendant had no reason to believe that the first defendant would not be able to comply with the plaintiff’s terms of trade.

34        In the Standard Terms & Conditions of the factoring agreement, the plaintiff warranted to Oxford that it had “investigated the financial status and credit” of the first defendant and was satisfied that it was able to pay its debts when due. Andrew Pearson, finance manager of the plaintiff, stated in evidence that the plaintiff had made this investigation. This evidence does not assist the plaintiff.

35        O’Grady gave evidence of subsequent conversations with the second defendant in which he indicated that the plaintiff would get paid and he usually added that this was subject to Grocon having paid it. Again, this evidence does not, in my view, assist the plaintiff.

36        In all the circumstances, I am not satisfied that the first defendant or the second defendant have engaged in conduct that is misleading or deceptive or is likely to mislead or deceive, and so far as the representations relied upon relate to future matters, I am satisfied that the first defendant and the second defendant have adduced sufficient evidence to satisfy me that the second defendant had reasonable grounds for making the representations.

37        I therefore dismiss the claim against the first and second defendants so far as they are based on the TPA and the FTA.

38        There will be judgment for the plaintiff in the sum of $104,346.19 against the first defendant.

39        I will hear from the parties on the question of the appropriate amount of interest to award at the statutory rate and costs.

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